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Airbnb a popular alternative to hotels, but is it legal in NYC?

Airbnb's revolutionary simplicity has made it easy for scores of people to list and discover lodging options in private residences and book them easily, quickly and safely, but a basic search for New York City lodging demonstrates that more than half of the available bookings on the popular vacation rental website run afoul of New York State law.

Many units are subject to fines ranging from $1,000 for a first offense to $25,000 for repeated violations, according to a New York City Council bill passed in October.

Airbnb is aware of the problem. It lobbied and spoke out publicly against the passage of the New York State law in June of 2010 that banned a particular yet very popular type of short-term rental, but it did not make changes to its site when the law went into effect in May 2011. State officials say that Airbnb's vow to work with the city on a solution does not extend beyond a heavy lobbying effort to change this law.

Related: The good, bad and ugly of Airbnb in New York City

Making Airbnb work in New York City is a priority, said David Hantman, the service’s Global Head of Public Policy. “We can’t possibly keep up with the law in all the cities,” Hantman told Skift. “Is there a model city? What we’d like to do is figure out a way to make New York the model city. We think we are creating a system that’s better than the current situation. My main goal is get laws that clear the way for our hosts.”

The difference between a legal and an illegal apartment rental in New York City is relatively clear: If a listing offers an entire apartment in a Class A dwelling -- which represent all but a few dwellings in the city -- for less than 30 days and the host is not present during the rental, it's illegal. If the listing is for a room in a house and the host will be present, it's legal. Also legal under the law are traditional B&Bs, couch surfing, and home swaps as long as money doesn't change hands.

Airbnb says the law should be more clearly defined, and cites apartment listings – even those for 29 days or less – that are legal. “It’s a matter of opinion,” Hantman said.

On a recent Airbnb search for a two-night rental for the weekend of January 18 in New York City, about 5,800 options turned up – more than half remained after clicking “entire/home/apt,” all of which are illegal under New York law.

A city official provided Skift with an example of a property listed on Airbnb that the city recently shut down: A three-family home on the 500 block of Greene Avenue in Brooklyn was vacated for overcrowding following an inspection by the city. Inspectors found inadequate exits and no sprinkler or fire alarm system. The home was occupied by 44 guests.

"The vast majority of Airbnb listings are multiple units by the same entity," said Sarra Hale-Stern, District Office Director for New York State Senator Liz Krueger, who sponsored the legislation that made short-term rentals illegal. "It's not Aunt Suzy going off to London for the month. It's corporate entities doing it 12 months out of the year," Hale-Stern said.

For years, Airbnb's most famous host was Toshi, who acted as a middleman for owners who needed someone else to shuttle tourists around, hand out keys and manage listings. Eventually, the Toshi name turned too toxic and he was forced to change his operating name to Smart Apartments LLC, but the listings remained on Airbnb.

In October, OSE sued Smart Apartments for operating more than 200 illegal short-term rentals in more than 50 buildings. The action points to a new tactic the city is using: "With Toshi, they're looking at online false advertising as part of their lawsuit," said Hale-Stern. “Consumer protection law is a new angle and it will be interesting to see where this takes them.”

The city has an injunction keeping Smart Apartments from operating or advertising, and it's seeking both penalties and $1 million in punitive damages. Although the listings for Smart Apartments have since been removed from Airbnb, at press time listings that corresponded with addresses listed in the city’s complaint were still discoverable through Google.

Hantman couldn’t comment specifically about why Toshi/Smart Apartments operated for so long on Airbnb despite media attention and complaints from neighbors, but he did confirm that the listings were now off the site.

Airbnb knows it has a problem. In public interviews and private exchanges, CEO Brian Chesky and other company leaders place blame on Airbnb's users' failure to read its policies or have made non-committal claims that they're working with local authorities to iron out problems.

Hale-Stern disagrees with that claim. "Airbnb has reached out a number of times to the city to convince them they should change the law to make their business model legal,” she said. “Airbnb has not shown any interest whatsoever in being helpful. It's shown no interest whatsoever in taking the illegal listings off the site."

Airbnb’s Hantman says that it’s not that easy. “We are a platform that serves 34,000 cities,” he told Skift. “New York is a big one. We try to be as open as we can and we are trying to keep our hosts better informed. We want to avoid becoming legal advisors who are required to know the law in every market we operate.”

Airbnb’s first public foray into discussing its New York problem was on its new Public Policy blog. Hantman used it to respond to a New York Times story about Airbnb hosts receiving violations from the city. He wrote: “In many cities, laws are confusing and unclear.”

“New York tried hard to stop the illegal hotel industry,” Hantman told Skift. “Laws that stop that make sense.” But that doesn’t represent the typical Airbnb host, he argues. “Half of our people use the money they make to pay rent.”

However, Andrew Goldston, the communications director for Senator Kreuger, said there's a difference between what Airbnb says in public and what the market actually is. "The bulk of their business is illegal hotels. It's one thing for them to say on camera that their model is this nice thing, but it's simply not  true."

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